Pfizer have pulled out of Cork today, see story here. I know these are manufacturing job losses but does anyone know what kind of manufacturing we are talking about? If its high-grade maufacturing that only be done by PhD graduates, then this is a very ill omen. Pharmaceuticals has been cited as one of three important areas where we need a greater supply of PhD researchers (Expert Group on Future Skills Needs).
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I notice that it is again possible to embed web-links in the text and to use other editing options such as justifying the text.
lack of critical mass in Phds - to the batmobile martin
What's the elasticity of supply of PhD's ? Why can't we just import them? It would save a lot of money.
And don't ask me to justify this text I'm just a (by assumption, right-wing) economist.
Thats a good point Kevin. Though the European labour market for PhDs itself could do with a lot more graduates in ICT, biotech and pharma. So we're looking at PhD graduates in these fields being a very scarce resource.
Private companies won't pay more than they have to for these PhD graduates, so they will probably set up where these graduates form a natural critical mass.
If one assumes that people like to work in their country of origin (perhaps despite the availability of higher salaries abroad), then it makes sense to produce our owm PhD graduates in these areas, so we can be assured that the likes of Pfizer will want to set up high-end operations on our shores.
I suppose the critical factor is how easy would we find it to attract a critical mass of PhD graduates from other countries to work in Ireland over long segments of their careers. Its a big challenge, and would probably require setting up incentives that would approach the cost of the Irish PhD training programmes.
But the other salient point is that our government doesn't set most salaries for PhD researchers in ICT, biotech and pharma. These salaries are offered by private companies that will strive to keep their costs down.
But where is the market failure here? I know it sounds very free-market but its a useful way of thinking abut things. So why should we subsidise Pfizer & not McDonalds? Is there some externality - like agglomeration ?
Well it depends what angle one takes on this. Investing in primary and second-level education could be viewed as a subsidy for almost every employer in the state. But these investments create high employment and tax revenue. The same is true for investment in third and fourth level education. These investments create new (high value) employment opportunities, thereby freeing up some (low value) employment opportunities. Investment in third and fourth level also bolsters govt coffers, from both "high-value" salaries and the corporation tax that we levy on Pfizer and the like.
The real subsidy is probably the low corporation tax rate that is available in Ireland. But this subsidy is not available on a discriminatory basis, as both Pfizer and McDonalds can benefit from it.
The real market failure may be occurring in the market for foreign investment. But I'd be very uncomfortable about stripping governments of revenue from corporation tax. Its not a simple picture by any means, as Pfizer are (or were) here for a number of reasons, including an educated workforce, low corporation tax and the use of the English language, to name but a few.
Attracting (or keeping) Pfizer on our shores is an intervention in the free market, but the agglomerated interests of individuals living on these shores may be the mandate for the intervention. We probably don't have the scale to set up an operation like Pfizer in Ireland (though I'm completely unsure about that) and this may be why the collective "self-interest" disregards the free market in this instance. As you suggest, the collective benefit from agglomerating self-interest is higher levels of employment and higher (hopefully optimal) levels of taxation revenue.
Is this what you had in mind when you mentioned agglomeration?
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